Ofgem promises to 'break-up' energy markets monopoly

The big six energy companies are to be forced to offer bills more in line with costs, according to wide-sweeping reforms proposed this morning (March 21).

Utility watchdog Ofgem has pledged to make energy companies offer lower bills or fine them up to 10% of their turnover.

Ofgem has said while wholesale gas prices rise power companies increase bills however, it now has evidence, when prices fall bills remain high.

The watchdog's review also found competition is being 'stifled' by a combination of tariff complexity, poor supplier behaviour, and lack of transparency.

And, the degree of influence the big six assert on the retail market 'has not diminished' since Ofgem's 2008 probe.

The clearest example, being evidence of the 'big six' adjusting prices in response to rising costs more quickly than they reduced them when costs fell.

Ofgem chief executive, Alistair Buchanan, said: "Energy companies have failed to play it straight with consumers and so Ofgem is proposing to break the stranglehold the Big Six have over the electricity market by making them auction up to 20 per cent of their generation output.

"This would increase price transparency and make it easier for new players to enter the retail market."

Ofgem has also announced a new investigation into Scottish Power and is exploring whether it needs to bring similar actions in the non-domestic market where it feels small business are being priced out of the market.

Investigations into British Gas, EDF Energy and npower into how they handle consumers' complaints and alleged misselling by EDF Energy, npower, Scottish Power, and Scottish and Southern Energy are ongoing.

"It is no surprise that they are bamboozled when tariff complexity has increased from 180 to more than 300 since 2008.

"That is why we are planning to sweep away this complexity so suppliers' prices are fully exposed to allow easy price comparisons.

"We are also backing these reforms with a tough approach to enforcement. Consumers must have confidence that energy companies are playing fair at a time when they are being asked to foot the £200 billion bill to pay for the investment Britain needs to ensure secure and sustainable energy supplies."

Ofgem has also called in an independent accountancy firm to examine forensically companies' returns.